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Vodafone Idea shares jump after report suggests Centre may buy token stake in firm

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Vodafone Idea shares were in demand on Wednesday after a report suggested the government is planning to pick up a token stake in the company.

Vodafone Idea shares jump after report suggests Centre may buy token stake in firm
Vodafone Idea shares rose on Wednesday after a report said the Centre is mulling buying a token stake in the private sector telecom operator. The Vodafone Idea (Vi) stock jumped as much as 3.6 percent to Rs 9 apiece on BSE before trimming gains.
At 12:50 pm, Vodafone Idea shares traded 1.5 percent higher at Rs 8.8 apiece on the bourse. The benchmark Sensex index was up half a percent while the exchange's telecom gauge was up 3.1 percent.
The government is planning to pick up a token stake in Vi by converting a part of the dues that the company owes to the Department of Telecommunications (DoT), according to the Economic Times report.
The move is aimed at alleviating investors' concerns and help the loss-making company raise funds to improve its operations. The Union Cabinet is likely to take a decision on the issue on Wednesday, however "there is no certainty", the report cited a source as saying.
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The source also said the Centre is not interested in running the affairs of the company. The idea behind buying a token stake is to keep the country's telecom market a three-player one, comprising Reliance Jio, Bharti Airtel and Vodafone Idea.  Besides, the only other notable player in the market is state-run Bharat Sanchar Nigam Limited.
The total gross debt of Vodafone Idea, as of June 30, was estimated at Rs 1.92 lakh crore, according to the company's April-June earnings report. The debt amount comprises deferred spectrum payment obligations of Rs 1.06 lakh crore and AGR liabilities of Rs 62,180 crore that it owes the government.
In June this year, Aditya Birla Group chairman Kumar Mangalam Birla had written to the government saying that Vodafone Idea will not survive unless the Centre provided some relief. Birla had also offered to hand over the Aditya Birla Group's stake in the debt-laden Vi to the government.
Speaking on Vodafone Idea's inability to raise Rs 25,000 crore despite trying for nearly a year, Birla said that the "lack of viability in the telecom sector" is preventing the company from raising money.
However, in August, the telecom company said it had managed to pay its licence fee dues for the first quarter of 2021-22. Without specifying the amount, Vodafone Idea said that it paid the entire outstanding dues for the quarter.